Below we presented the list of 5 Best Casino and Betting Stocks to Buy Now. For our detailed discussion and a more comprehensive list please see 11 Best Casino and Betting Stocks to Buy Now.
5. Churchill Downs, Inc. (NASDAQ:CHDN)
No of HFs: 28
Total Value of HF Holdings: $511 Million
CHDN is a horse racing complex located at Central Avenue in South Louisville. They are known for hosting the annual Kentucky Derby. Recently, the company announced Mike Anderson as their new president, general manager. Mike recently serves as vice president for operations and led the development and construction of more than $300 million in capital projects. Bill Mudd, president, and chief operating officer of Churchill Downs Inc., said in a news release
“Mike Anderson is a uniquely qualified leader to assume the role of President at Churchill Downs Racetrack having successfully and consistently delivered on company goals across multiple departments. Over its 146-year history, the racetrack has grown into an incredibly sophisticated and complex business organization, and Anderson is poised to lead it through continued growth and success.”
The top hedge fund holder of this stock is Paul Reeder and Edward Shapiro’s PAR Capital Management which had $167 million invested in the stock at the end of September. An insider 1,800 shares at around $77 in March 2020. The stock is up 168% since then.
4. MGM Resorts International (NYSE:MGM)
No of HFs: 41
Total Value of HF Holdings: $1.23 Billion
MGM is a global hospitality and entertainment company that owns national and international locations featuring best-in-class hotels and casinos. In August 2020, InterActiveCorp, the US media giant announced a 12% stake in MGM Resorts International for an aggregate of approximately $1 billion. IAC CEO Joey Levin said in announcing the deal
“MGM is a leader in gaming, hospitality, and leisure with a storied brand and an enviable market position. The current pandemic brought revenue (though not expenses) to a temporary halt, and required MGM to repurpose cash it had wisely stockpiled for share repurchases to instead defend the solvency of the company. The good news is, we believe MGM has enough cash and access to capital to make it to the other side competitively stronger.
When the world returns to normal, MGM will be just as capable post-pandemic as it was pre-pandemic in servicing visitors in over 35% of the Las Vegas Strip’s available rooms, plus eight regional properties across the US, two in Macau, and hopefully in Japan. The 34 million members of MGM’s loyalty program still have their M-life Rewards, and we’re confident that many are eager to return to the properties they love. And when Las Vegas fully re-opens – even if it must wait until a vaccine for that to occur – we expect it to roar back: a new NFL team, a new stadium, a drivable destination, and months of pent-up demand could drive a powerful resurgence.
But that’s not what originally drove us to MGM, nor in large part drove our final decision to invest. We have a history and much experience in online commerce. So we began our analysis with a focus on a small piece of MGM, a portion of its revenue so small that it rounds down to zero: its online gaming revenue. We’ve followed the online gaming space for a while, looking for an opportunity to enter, but we were generally unsatisfied with the landscape we saw. The regulations in this $450 billion global industry, with less than 10% U.S. online penetration, have required a physical presence and geographic boundaries in each state to operate the product consumers demanded – anathema to the borderless environment in which we’ve operated our businesses. To operate true sports betting and digital gaming, a provider is currently required to partner with a local casino operator. And while we believe that regulatory environments generally catch up with consumer demand, it’s taken quite a while in this category, so we found one of the leading players operating in 7 going on 11 states by the end of 2020: MGM, which pairs a strong physical presence and brand with talented online operators in a fast-growing joint venture in online gaming. Similar to Disney’s advantages over pure-play streaming companies with an iconic brand and multiple avenues to monetize the same intellectual property between streaming, theatrical releases, merchandise, and theme parks, we believe MGM also is an aspirational brand, which could be delivered with daily accessibility and offer gaming consumers (including the 34 million M-life Rewards members) a wider range of services, both physical and digital, than any competitor. And MGM, with its highly capable joint venture partner GVC, has only just barely begun to deliver these products.
…Turns out, MGM also has a $2.5 billion EBITDAR (a gaming industry metric designed to reflect profitability before taxes, capital expenses, and real estate expenses and simplify comparisons between those operators that own real estate and those that do not) operation domestically that comes alongside the opportunity in digital sports betting and table games, at a normalized free cash flow yield over 10%. This combination doesn’t exist in any growing internet opportunity.
As we looked further into MGM, we recognized a familiar sum-of-the-parts story with publicly-traded subsidiaries. MGM’s implied “stub” – the domestic business without the real estate – trades at an implied value of nearly zero. That’s not unlike IAC’s “stub” – which is perennially valued at zero (or less). When we saw the collection of well-run businesses (check), a sturdy balance sheet (check), and the undervalued “stub” after accounting for cash and publicly-traded securities (check), we realized that the MGM situation is remarkably similar to that of IAC.
…Over the next decade, free cash flow at MGM could be in excess of its current valuation, and we believe the business will have ample opportunities to invest that capital. If nothing else, of course, our ownership will steadily accrete up if MGM continues to use that free cash flow to shrink its capital base. Regardless of how MGM chooses to put its cash flow to work, the power of that cash flow doesn’t appear to be getting much value in the market, and we believe that those financial dynamics – on top of all the other positives – make this investment and its potential return every bit as worthy as other opportunities we may have to deploy our capital.”
The top hedge fund holder of this stock is Keith Meister’s Corvex Capital which had $490 million invested in the stock at the end of September. An insider recently purchased 111,198 shares at around $19 in August 2020. The stock is up 52% since then.
3. Draftkings, Inc. (NASDAQ:DKNG)
No of HFs: 43
Total Value of HF Holdings: $821 Million
In an article, Alger Mid Cap Focus mentioned that Investors responded favorably to DraftKings launching online sports betting in Illinois
“DraftKings is an online gaming operator. Its Daily Fantasy Sports (DFS) allows users to virtually draft teams of players from professional sports leagues and potentially earn a payout based on how well their teams compete with results driven by how athletes perform in real life. DraftKings Online Sports Betting (OSB) involves the company taking wagers or bets from customers on sporting events. DraftKings’ third offering. Online Casino, involves customers betting real money when playing casino games like slots and blackjack online. Investors’ concerns that DraftKings’ revenues could be hurt by the pandemic suspending sporting events have been unfounded with professional football, basketball, baseball, hockey and college football continuing without significant disruption, which has supported the performance of DraftKings’ shares. Additionally, DraftKings has entered a marketing deal with ESPN. which could potentially lower the gaming company’s customer acquisition costs as well as shut out competitors from using the channel for marketing. A record high level of sports betting in New Jersey during August, strong monthly results for online gaming in the same state and Pennsylvania results also supported the performance of DraftKings shares. Investors also responded favorably to DraftKings launching online sports betting in Illinois.”
2. PENN National Gaming (NASDAQ:PENN)
No of HFs: 45
Total Value of HF Holdings: $1.18 Billion
The stock was mentioned as one of the Top 10 Sin Stocks to Buy Now. The top hedge fund holder of this stock is Alex Sacerdote’s Whale Rock Capital Management which had $421 million invested in the stock at the end of September. An insider purchased 27,777 shares at around $18 in May 2020. The stock is up 450% since then.
In an article, Alger Mid Cap Focus mentioned a few of their comments on the stock.
“Penn National operates 40 properties (casinos and racetracks) across 20 states. In February. Penn National purchased a 36% interest in Barstool Sports, an online sports media company with 66 million monthly active users. Penn National is using Barstool Sports as the brand of its digital strategy and retains 100% of the sports betting and online casino (iGaming) proceeds in the relationship. Traditional brick¬and-mortar casino gambling in the U.S. is not a growth industry: however, two unique growth areas exist for casino operators: online sports betting (OSB) and iGaming. More states are considering legalization of OSB and iGaming due to Covid¬19-related budget shortfalls, as gambling can raise substantial tax revenue. Importantly, data shows that sports betting and online casinos do not cannibalize brick-and-mortar casino revenues. Additionally, gaming companies must have a physical presence within the states where they seek to have online gambling and sports betting legalized, so Penn National’s brick-and-mortar facilities give the company an advantage in this area. Shares of Penn National performed strongly during the third quarter in response to the company’s brick-and-mortar properties recently generating higher margins compared to pre-Covid-19 levels. a result of the company cutting costs and increased customer spending. Investors also responded favorably to Barstool’s September launch of its Sportsbook app in Pennsylvania. Additionally. sports betting and online gaming levels have reached record highs in numerous states.”
1. Caesars Entertainment Inc. (NASDAQ:CZR)
No of HFs: 74
Total Value of HF Holdings: $1.85 Billion
The best casino and betting stock to buy now is CZR. The company was mentioned in the Top 10 Stocks Billionaire Daniel Loeb Just Bought. They are known as a gaming and hospitality company that owns and operates gaming facilities such as Paris Las Vegas, Planet Hollywood, Harrah’s Las Vegas, and more gaming companies.
Recently, the company announced the closing of the sale of Eldorado Resort Casino Shreveport to Bally’s Corporation for $140 million in net proceeds, subject to customary working capital adjustment. Tom Reeg, CEO of Caesars Entertainment, Inc said,
“The completion of the sale of Eldorado Resort Casino Shreveport satisfies the Federal Trade Commission request to divest the asset in connection with the Caesars-Eldorado transaction which closed earlier this year. Since our acquisition of the property fifteen years ago, our Team Members’ passion and commitment have driven our success in Shreveport. We wish all of them continued success under Bally’s ownership.”
Please also see Top 10 Best Sin Stocks to Buy Now and 10 Extreme Dividend Stocks with Huge Upside.
